Thursday, January 15, 2009

War of attrition continues

PM Yulia Tymoshenko's explanation why the sample quantity of gas supposedly dispatched into the Ukrainian gas transit system for shipment to Western European customers yesterday was not transferred is posted [in English] by the Z.I.K. newsagency site here

But why couldn't an equivalent amount of gas have been exported from Ukraine's huge storage facilities in the western part of the country as a goodwill gesture?

And by pumping only insignificant test quantities of gas today, Gazprom has showed a callous disregard to the plight of millions of Eastern Europeans who are suffering gas shortages in the middle of winter.

The BBC, in an article entitled "Strategy behind Europe's gas game" describes the gas stand-off between Russia and Ukraine as "a poker game, where the two players bluff and bet against each other," with Europe caught in the middle.

The stakes for Ukraine's politicians could not be higher. If Ukrainian consumers, particularly domestic consumers in the Eastern part of the country, begin to experience the serious gas shortages that will inevitably occur after a period of time, these will seriously affect Yulia Tymoshenko's popularity and her chance of becoming president later this year. She and her eponymous party also need financial support from her industrialist backers, which could be lost in a protracted stand-off with Russia.

For president Yushchenko a tough stance in this gas crisis is a desperate [and hopeless] last chance to gain respect amongst some of the electorate.

But Russia has much to lose too if it drags on much longer. Its credibility as a reliable supplier of gas is being eroded day by day to a position from which it may never recover - arguments for diversification of energy supplies are growing ever stronger in the EU.

President Putin has already complained of significant loss of revenue caused by the crisis, and of difficulties caused by reduced output. [See his interview with the German ARD TV, dubbed into English, here]

So, who will be last man standing?

As matter stand now, it is European customers who are suffering the most hardship. It is up to EU leaders to suggest proposals to minimize their plight e.g. by paying Ukraine's transit fees themselves until agreement is met on what Ukraine is to pay Russia for gas. Naftohaz Ukrainy has just proposed that Gazprom provides all the 'technological' gas that is required. A portion of west-bound Russian gas could be retained by Ukraine to cover these fees, removing the 'technological' gas problem.

However the crisis pans out, the gas business will emerge much changed.

Update: Details, on the official Ukrainian government website, of Tymoshenko's latest "constructive" late-night chat with Putin, [in English] here

p.s. It seems that it was head of presidential secretariat Viktor Baloha was staying at the burned out Swiss chalet I mentioned in my previous blog. Hope it didn't spoil his holiday break.. or singe his beard..